We’ve all seen the movies where the main characters are trying to pull off an elaborate heist. To make sure it works, they all gather round the blue-prints (and maybe a 3D model) of the building where the jewel, or safe, or secret document, is kept so that they can prepare for every eventuality. Sometimes it works, sometimes it doesn’t, but films always need some kind of drama. In real life, you want to cut out as much drama as possible, especially when starting your business. You need to plan carefully and follow it up with a successful heist! A business model is the blueprint for how your business functions. It shows you every angle and allows you to examine the potential weaknesses and strengths of your business, as well as innovate and take advantage of market gaps.
Like a blueprint, your business model should show the essential building blocks of your business. For example, who will your customers be? What is your value proposition, that is, what are you offering to customers that they can’t get elsewhere? How will you make money? What resources will you need? Fill in each section accurately and in as much detail as possible to best assess your plan. Research your market and customers to help you. Once you have filled in all the necessary building blocks, you can then use them to assess three things: the desirability (do people actually want it), feasibility (it is possible to do) and viability (will it make money) of your business. Your business model is validated if it can do all three!
Once your business model is finalized, don’t put it away and never look at it again. Business models should be reviewed frequently to keep them up-to-date and relevant. Let’s take a famous example: Netflix. Over 200 million people are currently subscribed to Netflix worldwide and a large part of that is down to the company’s successful business model… and business remodelling. Did you know that Netflix actually launched in 1997? The original business model was an online DVD rental service which, in 2006, had grown to 5 million members. In 2007, though, Netflix began to introduce the model that we know today with a streaming service alongside DVD rentals. By 2012, they were making their own content and, by 2016, the now-exclusively-streaming service had launched in over 190 countries across the globe. As you can see, Netflix’s business model has changed significantly since its launch to take into account new market opportunities and current trends and technologies. (Netflix’s rival, Blockbuster, on the other hand failed to adapt to changing environments and went bankrupt in 2010.)
One of the tools you can use to help you create a business model is the Business Model Canvas, like the one for Netflix illustrated here. To find out more about this and how we can help you to start, survive and thrive, contact us at the SME Centre of Excellence.